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China Law Blog China Law for Business

China’s Communist Party In Your WFOE?

Posted in China Business, Legal News

One of our China lawyers got a client question the other day regarding the role their China WFOE must provide for China’s Communist Party within the WFOE.  The client noted how the CCP’s charter states that any company with three or more party members must establish a party organization and how China’s Company Law also mandates that companies should provide for party activities. The client then noted that its WFOE had one employee  who was a CCP member.

We responded as follows:

  1. The regulations for WFOEs provide for dealing with employee unions. They do not deal with CCP matters.
  2. There is no formal law or regulation about the CCP’s role in the workplace. The constitution of the CCP provides that every workplace in which there are three or more party members employed should establish a basic CCP organization.
  3. Large SOEs (State Owned Entities) in China typically have a CCP organization in their business operations, but it is rare for private companies of any size to have any CCP organization and even rarer still for a WFOE.
  4. Large WFOEs in China are coming under increasing pressure to allow for CCP controlled labor unions. This is only common in large WFOEs with many line worker type employees. So far, we have not heard of this happening in any service business WFOE.
  5. Since the CCP rules China, regardless of the formal laws and regulations, if three or more CCP members seek to form a party organization within your WFOE, it is advisable to accede to their request. CCP participation in SOEs makes complete sense. CCP participation in private companies makes little sense. This is why the practice is generally reserved for SOEs.

What are you seeing out there?

  • http://www.lehmanbrowninternational.com/en/press/news_view.asp?id=8678 Davin Torjsen

    All medium sized China WFOEs (typically any foreign investment above ten persons) and JV’s always have a CCP member inserted into their business. It is not “rare” as you suggest it is highly commonplace. Most foreign investors won’t even know. But they will report back to the local party secretary. It is NOT something you can legislate for so forget about telling anyone else to try and avoid it.

    • http://www.chinalawblog.com/ Dan Harris

      You misread our post. We NEVER said it was rare to have a CCP member in a WFOE. That would been silly. What we said was that “it is rare for private companies of any size to have any CCP organization and even rarer still for a WFOE. Organization, not people!

      • http://www.lehmanbrowninternational.com/en/press/news_view.asp?id=8678 Davin Torjsen

        Huh? You just said again: “it is rare for private companies of any size to have any CCP organization and even rarer still for a WFOE.”
        Er…not it is NOT rare. Most companies have someone reporting on them that is a member of the CCP within the company. The CCP doesn’t need permission or to formally ask to place someone in a WFOE. They just do it anyway, often without the WFOE even knowing. The CCP don’t need to legitimise ANYTHING in China let alone ask “permission” from a foreign company to form a CCP organisation within it.

  • Terry Newman

    In my experience most people join the CCP for pragmatic reasons. At university they may have in mind employment in the public service or large SOE’s. I have never encountered and ideologically motivated member, but perhaps they exist. We have a handful of members in our WOFE, but no one has ever mentioned forming a union of any sort.

    • http://www.shigroupchina.com/ Jim Nelson

      I agree. In my 20 plus years I have only met one ideologically motivated party member, and he died of old age a dozen years ago.

  • William

    I once worked for a large China-based manufacturer that was technically a WFOE. There was a CCP organization and a party-connected labor union. The union was basically responsible for organizing fun events and instilling patriotism; the CCP group was a little secretive but I doubt they ever did much more than hold boring meetings.